BB&T Corporation (BBT) has announced the signing of an agreement to acquire New Jersey-based Crump Group Inc. The deal will allow the company to diversify and increase fee revenue in BB&T Insurance Services, a subsidiary of BB&T.
Under the terms of the deal, BB&T will pay $570 million in cash to buy Crump Group’s life insurance and property and casualty (P&C) insurance units, along with the rights to use the Crump name. The transaction does not include Ascensus, Crump Group’s retirement services business.
BB&T further stated that the agreement is still subjected to regulatory approvals and is expected to be closed by the end of the current quarter. Following the closure of the deal, these two divisions are likely to add nearly $300 million in revenue annually.
Further at the closure of the agreement, BB&T will become the largest independent wholesale distributor of life insurance in the country. Also, John Howard, president and CEO of Crump Group, will join BB&T Insurance operations in a senior leadership position.
Crump Group is a privately held company. Its life insurance unit is one of the largest wholesale distributors of services and offers support to the sale of life-related insurance and annuity products. Moreover, Crump Group’s P&C divisions provide wholesale brokerage and specialty programs to the commercial P&C insurance industry.
Our Viewpoint
We believe that Crump Group deal will enable BB&T to expand its market share in life insurance distribution and P&C businesses. The transaction will further provide impetus to the company’s revenue, which has been recently hampered by various financial reform rules.
BB&T relies extensively on acquisitions to expand its revenue streams. Last year, the company bought Atlantic Risk Management and Liberty Benefit Insurance Services. In November 2011, BB&T also announced its plan to acquire Florida-based BankAtlantic, a wholly-owned subsidiary of BankAtlantic Bancorp Inc. (BBX). The deal is still pending for regulatory approval.
Though BB&T mainly focuses on organic growth strategy, the company has never been averse towards expanding its market share through acquisitions. Going forward, management expects to maintain this balanced growth structure.
BB&T currently retains a Zacks # 3 Rank, which translates into a short-term Hold’ rating. Considering the fundamentals, we are also maintaining our long-term “Neutral” recommendation on the shares.
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